Opinion
22614
February 5, 2002.
Thomas R. Maher, New York, for Plaintiff.
Roosevelt, Benowich Lewis, Llp, White Plains, (for Leopold) Twomey, Hoope Gallanty, Llp, New York, (for Medical Escrow Society, Inc.) Shaw, Licitra, Bohner, Esernio, Schwartz Pfluger, P.C., Garden City, (for Mutual Benefit Corp. Anthony J. Livoti, Jr.), for Defendants.
Defendants The Medical Escrow Society, Inc., Mutual Benefit Corporation and Anthony M. Livoti, Jr., for an order dismissing the complaint pursuant to CPLR 3211(a)(1), (2), (5), (7), CPLR 3016(b), and Insurance Law § 3203(a)(3). By cross-motion, Plaintiff Reliastar Insurance Company of New York ("Reliastar") seeks an order, inter alia, "estopping" the Defendants from relying on Insurance Law § 3203(a)(3), and for additional, stated relief.
In or about August, 2000, Reliastar commenced this action alleging, inter alia, that Defendant Guy Leopold ("Leopold") made false and fraudulent statements in applying for a $90,000.00 life insurance policy which Reliastar issued to Leopold in August, 1996. (Pltff's Cross Mot., Exh., "E", Cmplt., ¶¶ 7-8).
According to Reliastar, Leopold falsely represented in his application that he "had not medical or health ailments" and was not undergoing treatment "for any ailments including AIDS or AIDS related Complex * * *" (Cmplt., ¶¶ 10-11), when, in fact, he was "suffering from and being treated for a fatal disease" (Cmplt., ¶¶ 12, 17, 21-23).
Plaintiff further alleges in the verified complaint that the moving co-defendants — the Medical Escrow Society, Inc., Mutual Benefit Corporation, Inc. and Anthony M. Livoti, Jr. — were aware of the false representations and participated in an alleged conspiracy to falsely procure the subject policy (Cmplt., ¶¶ 11-20).
Moreover, and according to Plaintiff, the fraud was not "complete" upon the submission of Leopold's false and fraudulent application (Cmplt., ¶ 15), but rather, was later furthered through the perpetration of an additional and ongoing conspiracy among the Defendants to conceal the fraud until after the policy's two year incontestable period expired (Cmplt., ¶¶ 15-17). Insurance Law § 3203(a)(3).
Upon the instant motion, Defendants move to dismiss the complaint, arguing, that Reliastar's causes of action merely restate and reallege the same underlying theories of fraud — which, they assert — are barred as a matter of law by the expiration of the two year incontestible period.
For the reasons herein set forth, Defendants' motion to dismiss is granted and Reliastar's cross-motion is denied.
Preliminarily, the Court agrees that Reliastar's claims of fraud relating to the alleged conspiracy committed by the moving Defendants, are wholly conclusory and are unsupported by factual allegations sufficient to satisfy the requirements of CPLR 3016(b). See, Jaro Construction Corp. v. Weiner, 209 A.D.2d 585 , 619 N.Y.S.2d 655 (2nd Dept. 1994); and Scomello v. Caronia, 232 A.D.2d 625 , 648 N.Y.S.2d 688 (2nd Dept. 1996). See also, Williams v. Upjohn Healthcare Services, Inc., 119 A.D.2d 817 , 501 N.Y.S.2d 884 (2nd Dept. 1986).
It is undisputed that the policy contained the statutorily required, incontestability clause. Insurance Law § 3023(a) (3). Reliastar's present action to rescind and/or void the policy was instituted well after the elapse of the two year incontestability period. Significantly, incontestability clauses limit "the period of time that the carrier has to investigate the veracity of the policyholder's statements, after which it may not contest the policy except of stated grounds, usually nonpayment of premiums". New England Mut. Ins. Co. v. Doe, 93 N.Y.2d 122, 128 , 688 N.Y.S.2d 459 (1999); and Springer v. Allstate Life Ins. Co. of New York, 94 N.Y.2d 645, 650 , 710 N.Y.S.2d 298 (2000). See also, 69 N.Y. Jur.2d Insurance § 1383, at 602; 17 Couch 3d on Insurance (Russ Segalia) § 240:1, 240:3; 1A Appelman, Insurance Law and Practice § 332, at 385; Simpson v. Phoenix Mut. Life Ins. Co., 24 N.Y.2d 262, 267-8 , 299 N.Y.S.2d 835 (1969); Equitable Life Assur. Soc. v. Madis, 240 A.D.2d 100, 102 , 669 N.Y.S.2d 599 (1st Dept. 1998). It is well settled that once the incontestable period has elapsed, allegations that an insured procured the policy through fraud will not support a claim to void or rescind the policy. New England Mut. Ins. Co. v. Doe, supra at 131. See also, 69 N.Y, Jur.2d Insurance §§ 1393, 1395, at 619-20.
While the instant matter apparently involves the relatively new concept of "viatical settlements" Insurance Law § 7801, et seq. See gen'lly, M. Albert, Selling Death Short: the Regulatory and Policy Implications of Viatical Settlements, 61 Albany Law Rev. 1013 (1998), and includes claims that the additional Defendants were aware of Leopold's misstatements, the considerations relevant to the enforcement of incontestability clauses are no less applicable. This is consistent with the holding in sister states. See, Protective Life Ins. Co. v. Sullivan, 425 Mass. 615, 682 N.E.2d 624 (Mass.Sup.Jud.Ct. 1997); and Amex Life Assur. Co. v. Superior Court, 60 Cal Rptr 2d 898, 930 P.2d 1264 (Calif.Super.Ct. 1997).
More particularly, and irrespective of Reliastar's allegations that the moving Defendants were complicit in Leopold's misstatement, there is nothing in the papers submitted suggesting that Reliastar was, as a consequence, precluded from inquiring into or fully investigating, the veracity of Leopold's statements during the two year incontestability period. Protective Life Ins. Co. v. Sullivan, supra, at 635; and Simpson v. Phoenix Mut. Life Ins. Co., supra, at 267-8. While Reliastar has recast and repleaded its claim in various permutations, the first through fourth causes of action and the sixth cause of action alleging common law fraud are still grounded upon the theory the Leopold's fraudulent statements justify rescission, "tolling" and/or the voiding of the policy, such claims are now foreclosed by the elapse of the policy's two year incontestability period. See, Bankers Sec. Life Ins. Soc. v. Kane, 885 F.2d 820, 822 (11th Cir. 1989) (insurer's separate tort action for fraud dismissed as improper attempt to circumvent incontestability clause). Accord, 1A Appelman, Insurance Law and Practice § 332, at 385.
Moreover, assuming that a separate and properly pleaded "common law" fraud claim for money damages could be maintained in light of the foregoing incontestability clause, Reliastar's sixth cause of action also fails to adequately set forth the requisite allegations of injury. See, e.g., Held v. Kaufman, 91 N.Y.2d 425, 431 , 671 N.Y.S.2d 429 (1998); and 60N.Y. Jur.2d Fraud and Deceit §§ 11, 164, 167-170. See also, Laurel Ridge LLC v. Alfredo Nurseries, Inc., 286 A.D.2d 710 , 730 N.Y.S.2d 447 (2nd Dept. 2001).
Here, the complaint contains only vaguely framed allegations that Defendants' actions "have caused or will cause" damage (Cmplt.¶ 40). Indeed, there is no dispute that co-defendant Leopold is still alive; the Reliastar has been receiving premiums since the policy was issued; and that no benefits have, to date, been paid in connection with the policy. The assertions made by Reliastar pertaining to the issue of damages (Plainitff's Memo of Law at 40), are insufficient to establish the existence of injury so as to sustain the Plaintiff's common law fraud claim.
Lastly, that branch of the motion which is to dismiss the fifth cause of action predicated upon the Racketeer Influenced and Corrupt Organizations Act ("RICO") [18 U.S.C. § 1962], must also be granted.
In order to establish a RICO violation, it must be demonstrated that a Defendant, through the commission of two or more acts constituting a pattern of racketeering activity, directly or indirectly participated in an enterprise, the activities of which affected interstate or foreign commerce. DeFalco v. Bernas, 244 F.3d 286, 305-306 (2nd Cir. 2001). See also, Manhattan Telecommunications Corp., Inc. v. DialAmerica Marketing, Inc., 156 F. Supp.2d 376 (S.D.N.Y., 2001). It has been observed that Courts "must always be on the lookout for the putative RICO case that is really nothing more than an ordinary fraud case * * *" Nasik Breeding Research Farm Ltd., v. Merck Co., Inc., 165 F. Supp.2d 514, 537 (S.D.N.Y. 2001); and Goldfine v. Sichenzia, 188 F. Supp.2d 392 (S.D.N.Y. 2001).
Even accorded the most liberal construction Leon v. Martinez, 84 N.Y.2d 83, 86 7, 614 N.Y.S.2d 972 [1994]), the complaint's conclusory allegations of fraud and unexplained assertions of entitlement to "monetary damage to be calculated" at some later date (Cmplt.¶ 36), fail to state any claim sounding in alleged violation of the RICO statute. See, Manhattan Telecommunications Corp., Inc. v. DialAmerica Marketing, Inc., supra, at 380. Accordingly, it is,
ORDERED, that the motion of Defendants The Medical Escrow Society, Mutual Benefits Corp. and Anthony M. Livoti, Jr. to dismiss the complaint is granted; and it is further,
ORDERED, that Plaintiff's cross-motion to estop Defendants from relying on Ins. Law § 3203(a)(3) is denied; and it is further,
ORDERED, that with regard to the remaining Defendant, Guy Leopold, counsel shall appear for a Preliminary Conference on March 13, 2002, at 9:15 a.m.
This constitutes the decision and Order of the Court.